Efficient weighting of Swiss blue chips and mid-caps

Cyclic time is coming to the end, defensive values are in demand. The Swiss stock exchange SIX in Zurich. ALAMY

February 07, 2019 / Andreas Staub, Senior Solution Advisor

Picard Angst and v.Fischer Investas are now offering institutional investors interesting prospects for 2019 by combining their strategies for the Swiss equity market. Systematic Equity Switzerland invests primarily in Swiss blue chips, Swiss Equity 100 equally-weighted in the 100 largest / most liquid stocks of the SPI. The combination of the two products enables efficient control of the weighting of sectors as well as blue chips and mid-caps in a volatile environment.

In times of greater uncertainty, investors are increasingly looking for refuge in safe havens. Due to its defensive structure and politically stable situation, the Swiss equity market is such a safe haven.

2018 was the worst year for the Swiss stock market since the 2007/2008 financial crisis. Although there was a recovery at the beginning of the year, we still regard the Swiss stock market as interesting at its current level. Especially as we expect markets to remain volatile this year. Institutional investors, who tend to place a high proportion of their investments in their home market, avoid currency risks.

In particular Swiss equity investments have proven in recent years that they can be an interesting investment in the long term. Since companies are struggling structurally with a stronger currency, they had to adapt rapidly to new circumstances following the Swiss franc shock in January 2015. Management was obliged to revise their processes in order to fully exploit the untapped potential in terms of innovation, growth and profitability. Thanks to balance sheet discipline, this also led to investor-friendly behavior on the part of companies.

Weighting of the 20 largest positions

A combination of 30% Swiss Equities 100 and 70% of SES Systematic Equity Switzerland reduces the weight of the 20 largest positions from 79.6% to 61.7%.

Weighting of sectors

The addition of Swiss equities 100 increases the industrial goods sector and reduces the health and food sectors.

In periods of economic upswing, when small and mid-cap stocks tend to outperform, the proportion of the " Swiss Equities 100 " fund can be increased to take account of this fact. On the other hand, the share of the more defensive Systematic Equity Switzerland product should be increased as soon as there are signs of an economic slowdown and markets are expected to decline. In this phase, large-cap companies will perform comparatively better.

Systematic Equity Switzerland

With the Systematic Equity Switzerland Fund, Picard Angst offers an investment strategy that combines the advantages of an active strategy with those of a passive strategy.

The fund invests in Swiss equities using in a systematic, risk-controlled investment approach. At the same time, additional factor premiums are tapped while maintaining a risk profile comparable to passive investment strategies.

With its systematic approach, the fund considers a large number of quantitative factors, which can efficiently evaluate fundamental data, price data and analyst estimates and incorporate them into portfolio construction. The strategies of this fund are theoretically founded, comprehensively tested and implemented in a disciplined manner.

The advantages of passive investment strategies, such as transparency and liquidity, should be maintained through systematic and risk-controlled implementation and the possibility of exchange trading as with ETFs.

Swiss Equities 100

V.Fischer Investas Swiss Equities 100 fund aims to generate long-term capital gains and appropriate returns through investments in Swiss equities. The portfolio invests equally in equities from the SPI universe, taking into account a quantitative analysis for stock selection. A weekly rebalancing of equities with strong fluctuations (+/- 20%) from the theoretical average takes place. In addition, the equally weighted portfolio is balanced semi-annually against the original strategy. The fund generally holds the 100 largest/liquidest positions in the SPI.

Against the SPI index, where Roche, Novatis and Nestlé account for around 50% of the index weight, the equilibrium approach weights all companies at 1% each. This leads to a different diversification of individual stocks and industries.

The balancing approach promises long-term outperformance due to the small/midcap bias and systematic rebalancing. This leads to anti-cyclical behaviour and ensures that companies tend to be bought cheaper and sold at higher prices, which can often lead to an additional return in volatile markets.

INVESTAS

V.FISCHER INVESTAS provides its clients comprehensive services for the management and legal protection of assets. INVESTAS is specialized in investment consulting and asset management. Its aim is to provide professional advice to private clients, as well as institutions and companies. The service is personal, individual, transparent, discreet and motivated. At Investas, we are committed to continuity and we work in partnership with our clients based on mutual trust, discretion and shared goals.